Recognizing patterns in the financial market is a critical resource for today's trader.
Stock charting is a technique used to further the investor's understanding of dozens of frequently recurring market scenarios. Stock charts are the visual representation of a particular stock or index's price over time. Price is listed on the vertical axis and the time is listed on the horizontal axis. Stock charts may employ mathematical formulas using the historical price data of the stock to generate conclusions about the past price behavior of the stock, and in turn, attempt to anticipate the future price behavior. Stock charts create advantages for technical investors by helping them identify the underlying trend or pattern that is moving the price up or down. Chart patterns illustrate recurring situations that face investors every trading day.
Japanese candlestick charting is one of these techniques used to forecast price behavior. A candlestick chart is a group of candlesticks in chronological order. A candlestick is represented with two parts, the “body” and the “tails” (also called “shadows”). The difference between the open and close prices of a time period makes a box which is call the body. If the body is filled in, the stock price has gone down during that time period, whereby the top of body is the open price and the bottom of the body is the close price. If the body is not filled in, the stock price has gone up during that time period, whereby the bottom of the body is the open and the top of the body is the close. If the stock price did not change, a horizontal line will represent the body. The “tails”, or vertical lines, extending from the body indicate the high and low prices during that time period.
For more in-depth coverage on charting techniques, refer to ‘Japanese Candlestick Charting Techniques’ by Steven Nison.
It is also known to combine the technical indicators of the charting techniques with a technical analysis to enhance the studying of the shape and movement of a stock chart. However, with the existing solutions, generally individuals must use their own professional experience to understand which sequential indicators are characteristic of some events such as a change of trend of the price.
The present invention is directed to a system and method which automatically offers the user such understanding.